Need repairs? How to decide whether to go with your insurer's preferred contractor

Gina Levine, of Tamarac, said she used her insurer’s preferred contractor… (Carline Jean, Sun Sentinel )

August 5, 2011|By Julie Patel, Sun Sentinel

Should you hire the contractor recommended by your insurance company to repair your home or car after you file a claim?

There are some perks, such as discounts or warranties, but there also are drawbacks that consumers should be aware of.

Alice Thal, a nursing supervisor in Boca Raton, learned that lesson the hard way. After her Jaguar was damaged in an accident, she said she went with one of her insurer's preferred repair shops in part because it guaranteed the workmanship.

After the repair, she said the paint on the edges of the hood was chipped and rusted even though her insurer had paid for a new hood. Her insurer agreed to let her go to another repair shop and get the work redone. In all, it took several months for the repairs to be completed.

"It doesn't always mean they're reputable," Thal said of recommended repair shops. "I think consumers need to ask more questions and get several options before going in to do a repair: getting written quotes, getting invoices, getting guarantees that your parts won't be removed until [you've checked] the repairs."

Gina Levine, a 68-year-old retiree in Tamarac, said she made the right decision by hiring her insurer's preferred contractor to fix damage from the tornado this week. She said she likes that the company vets contractors and guarantees the work. "I don't have to look for a contractor. This way, you know what you're getting," she said.

Insurers started preferred service provider lists to make the claims process easier, said Lynne McChristian, a spokeswoman for the Insurance Information Institute, an insurance industry trade group. Insurers can establish quality standards, timelines and even price guidelines with the contractors on their lists. Some require their contractors to take customer service training.

Insurers don't require policyholders with claims to use preferred contractors.

Here's what they say are the benefits of using a preferred contractor.

It speed up the claims process. Some insurers require several repair estimates before approving the work, said McChristian. But if a policyholder decides to use a preferred contractor, the work can start soon after filing a claim.

"I don't have the physical [strength] to be running around" getting quotes, said Levine, a former New York City employee.

Often, damage can be stopped when repairs begin, and after storms, it can be tough to find contractors. Many homeowners had trouble finding roofers after Hurricane Wilma.

It minimizes price gouging. Insurers often work out lower rates for services with preferred contractors ahead of time. Contractors agree to this because they know they'll receive a steady stream of business.

"What we've done is arrange with contractors to make sure we have availability and at prices" that are reasonable, said Ross Buchmueller, president of Fort Lauderdale-based Privilege Underwriters Reciprocal Exchange, or PURE. The insurer only covers homes that cost at least $1 million to replace, so it picks contractors who are used to dealing with custom features in pricey homes.

When consumers are overcharged for work, the insurer either pays inflated claims and ultimately passes the cost on to all policyholders or the insurer doesn't approve the full claim and the consumer has to pay some of it out-of-pocket.

The work is guaranteed by most of the preferred companies, McChristian said.

"If the policyholder is not satisfied, they can alert the insurance company, which gets problems corrected while putting the repair company on notice that work must be done right," she added.

Levine said she decided to have repairs done by a subsidiary of her insurer, People's Trust in Boca Raton, because all work and materials are guaranteed for three years. Some materials, such as roofing supplies, have warranties of up to 40 years, according to Mike Gold, the insurer's president.

Some contractors who are not on an insurer's "preferred" list have similar warranties.

Policyholders may qualify for discounts. Some companies reward policyholders for using the preferred vendor. People's Trust gives policyholders a 10 percent discount on the deductible they pay for a claim if they use Rapid Response Team, a subsidiary of the insurer.

There also are some things consumers should watch for.

Erin Kristofco, an attorney for Merlin Law Group in Tampa, said in some cases, policyholders may get less work done by hiring a recommender contractor. For instance, she described a hypothetical situation in which a policyholder has a wall damaged by ash or soot after a fire.